There could be two possible reasons for such problem ,
1. You have disabled the "Use Drop Shadows for icon Labels on desktop" effect
2. You are applying an image other than jpg or jpeg on your desktop.
Solution for 1st reason :
Right -click on 'My Computer' icon and select 'Properties' from menu , switch to 'Advance' tab and click 'Settings' button in 'Performance' section , thereby enable this effect:

Solution for 2nd reason :
If the wallpaper , you are applying on your desktop , is in an extension other than jpg/jpeg than you will have to save it first as a jpeg/jpg image file
, to do so , open it in any graphic editor and save it as jpg/jpeg , apply it then and you will have no problem
.
BTW , Welcome to Crystal XP
.
Topic to be moved